Omniture Outperforms Google but 2007 is a Critical Year

Business Week looks at how web analytics company Omniture has grown to become one of the fastest growing software companies on the NASDAQ.

After going public last year, the company has a $1 billion market cap and claims big name clients such as Microsoft, Wal-Mart, Hyatt and Toyota. As more and more money is spent on online advertising Omniture has benefited from helping big companies understand what works and what tweaks are needed to their web site and their ad campaigns.

A year ago, Hyatt Hotels & Resorts was using an online ad agency to manage the 70,000 keywords that the chain bids on each day from Web search engines, and it had to use several programs to analyze the results. Omniture gives Hyatt one place where it can internally manage all of its keyword campaigns. Hyatt previously could only see the rate at which customers clicked on a search advertisement; now Omniture shows the conversion rate, or number of consumers who actually make a purchase based on a search ad. “It has dramatically changed the funding for each of the keywords and categories we buy,” says Hyatt’s director of e-commerce, Greg Johnston. “We are saving hundreds of thousands of dollars.”

Still, despite sales growth of 86% in 2006 – outpacing Google’s 73% growth – the company is yet to make a profit and is expected to lose close to $13 million this year. While some analysts are understanding that Omniture needs to spend lots on sales and advertising, others believe this is the year the company needs to turn the corner.

“If they don’t make progress toward their profit targets in the second half of the year, it could be cause for concern,” says Renaissance Capital analyst Phil Stiller. And there’s always the chance that Google will get more aggressive about Web optimization.

And, you know what? It’s not a “chance that Google will get more aggressive”, you can bet your $132 million in annual sales, that the company will challenge more aggressively this year. While Google Analytics is the best free platform out there, Google will no doubt bring to the market a more robust version, as it seeks to claim a stake in all aspects of its clients online marketing efforts. I fully expect to see major improvements to Google Analytics over the next 12 months, and Omniture should avoid the mistake of believing Google will focus on those companies only looking for a cheap and easy analytics solution.

So far, it seems Omniture CEO Joshua G. James, is keeping one eye over his shoulder…

“If we’re not scared of them, something would be wrong with us,” says James.